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:: Volume 13, Issue 2 (Spring 2018) ::
J. Mon. Ec. 2018, 13(2): 125-151 Back to browse issues page
An Investigation of Co-Movement of Financial Stability Index with Macro-Prudential Indicator through Wavelet Analysis
Kamran Nadri1, Sajad Ebrahimi2, Abbas Fadaie *2
1- Imam Sadiq University
2- Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran
Abstract:   (291 Views)
The present study aims at developing an aggregate financial stability index by using banking sector indices to assess financial stability and examine if the variable of credit-to-GDP gap corresponds to its long-term trend which represents the macro-prudential indicator has co-movement with the built financial stability index? To this end, monthly banking balance sheet data were collected from the Central Bank of the Islamic Republic of Iran from March 2007 to March 2017. Co-movement of two time series was assessed at two dimensions of time and frequency through wavelet analysis. It can be observed that there is a greater relationship between the two variables at short-term and medium-term. In the short-term, there is a negative correlation between financial stability and the representative of the macro-prudential variable. The increase of the credit-to-GDP gap results in a decrease in financial stability while these variables are positively correlated at medium-term. An increase in the credit-to-GDP gap increases financial stability, whereas such a relationship cannot be observed for the long-term. Thus, it seems necessary to adopt a macro-prudential policy more at medium term.
Keywords: Financial Economics, Financial Stability, Micro/Macro-Prudential Policies, Principal Component Analysis, Wavelet
Full-Text [PDF 456 kb]   (176 Downloads)    
Type of Study: Case Study | Subject: Economics
Received: 2019/09/2 | Accepted: 2019/09/2 | Published: 2020/04/20
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Nadri K, Ebrahimi S, Fadaie A. An Investigation of Co-Movement of Financial Stability Index with Macro-Prudential Indicator through Wavelet Analysis. J. Mon. Ec.. 2018; 13 (2) :125-151
URL: http://jme.mbri.ac.ir/article-1-436-en.html


Volume 13, Issue 2 (Spring 2018) Back to browse issues page
Journal of Money and Economy Journal of Money And Economy
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